Service Companies Meet in Vegas

by John F. Infanger and Jodi Richards On May 11, 2006

LAS VEGAS — This year’s Aviation Industry Expo saw a record 5,700 attendees for the AS3/GSE Expo and the combined conferences of the National Air Transportation Association and the Professional Aviation Maintenance Association. Among the hottest topics for aviation businesses here: future funding of the U.S. aviation system; the soon-to-be-in-service Airbus 380; and, a pre-conference FBO/Airport Symposium.

Heading up the discussions among delegates was the funding of the U.S. aviation system, now under consideration in Washington. On hand as keynote was James May, president of the Air Transport Association, who is leading a call for a new user fee system under which business aviation would pay significantly more than at present.

May told attendees that in light of funding cuts throughout the aviation system, the ATA “supports and prefers” alternative funding systems, specifically a user-fee based system for air traffic control. “The real issue,” says May, “is equity and overall sharing of the tax burden for use of the system.”

According to May, airlines used 70 percent of ATC services in 2004, but paid 94 percent of the cost of the service. General aviation, which May separates from business aviation, used some 4 percent of the ATC services and paid 2 percent of the cost. He says general aviation (piston aircraft) should continue to pay for the system through the fuel tax as general aviation typically doesn’t use the services of ATC. May adds that business aviation’s 15 percent share of the ATC services is equal to that of United Airlines and American Airlines combined, but that business aviation’s share of those costs is “much less.”

NATA president James Coyne countered May’s remarks by calling the ATC an “absolute monopoly,” from which many of its flaws stem. “If we’re going to modernize the ATC, we need to be in a competitive environment,” says Coyne. He adds that it’s not fair for business aviation and general aviation to fund a system that was created for the airlines.

May says the ATA’s perspective on use of the air traffic control system is “a blip is a blip” — each aircraft should pay the same amount for use of the system regardless of the number of passengers. Coyne says that logic is as “ridiculous as airlines saying a butt in a seat is a butt in a seat.”

Ed Bolen, president of the National Business Aviation Association was also on hand. He says, like May, there is a lot the associations agree on, such as growing the general fund and allowing general aviation to pay for use through the fuel tax. However, that’s not where ATA is going to spend its political capital, warns Bolen. ATA’s “political capital is going to be spent on the user fee battle.” Bolen adds, “Is a blip a blip or do you look at the incremental cost on the system? That’s the fight, and it’s a $2 billion fight.”

Airports and FBO's

Prior to the start of Aviation Industry Expo, a one-day FBO/Air-port Symposium was held for managers of airports and airport-based businesses. It was co-hosted by NATA and the American Association of Airport Executives. Among the topics: new money in the FBO business; EPA regulations; the FAA Part 16 complaint process; and, tenant/landlord relationships.

The past decade has seen a dramatic influx of money from private equity firms that have bought, consolidated, and at times rebranded traditional aviation firms. Many questions remain about the long-term impact this trend will have. How will it change the current business at a particular airport? Will new investment come as a result? Is this a different level of lease negotiation? There are others.

Comments NATA president James Coyne, “I think we have just begun to see this play out.” Saying he’s bullish about the trend, Coyne says it brings three things to airports: capital, people, and brand.

The main obstacle, he says, is political. Traditionally, tenant operators have found success by getting aligned with the local political scene and learned how to work within the local political environment. The question, says Coyne, is can a large private equity-owned company sustain such a relationship?

Another key FBO/airport discussion centered around the Environ-mental Protection Agency’s ongoing evolvement of the Spill Prevention Control & Countermeasure (SPCC) policy. Nancy Young, an environmental attorney for Beveridge & Diamond, P.C., relates that EPA has backed off its hard stance regarding secondary containment for mobile refuelers, though more clear definition from the field is still anticipated. The bottom line at this point in time, says Young, is, “You don’t have to build something.”

On the issue of FAA’s Part 16 complaint process, Dan Reimer and David Bennett headed up a discussion on the progress of the regulation over its first decade and its true intent. Reimer is a partner with the law firm of Kaplan, Kirsh & Rockwell; Bennett is director of the FAA’s Airports Office.

The Part 16 process, explains Reimer, is where the “rubber meets the road” regarding disputes between airports and tenants. It’s an administrative enforcement program — in order to get to court, one has to first exhaust the Part 16 process, which can take a year or more, he says.

Advantages to filing a Part 16, says Reimer, include access to FAA expertise and review; a process that, for an agency, is fairly clear; and, a tenant puts the burden on the airport to prove its case. However, he says the disadvantages outweigh the advantages — the process takes too long; it doesn’t always resolve the dispute; it’s difficult to weed out how past determinations may or may not have set precedent.

FAA’s Bennett says the agency sees Part 16 as a “last minute mechanism” to resolve a dispute and encourages informal resolution. Central to success is having key issue well detailed; the FAA doesn’t have the personnel for on-site investigations, he says.

Bennett says some 164 Part 16 complaints have been filed to date, with 42 percent dismissed because they were incomplete, and 32 percent appealed to an associate advisor.